While China has agreed to tighten intellectual property rights, this is the beginning of a long process with likely peaks and valleys like are trade talks, reports Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 3111.50, up 7.50
Fundamentals: Risk-sentiment is getting a boost to start the week after China promised to tighten intellectual property laws. Intellectual property has been a major hurdle in U.S-China trade talks and what we’ve referred to as the substance. China has been extremely reluctant to include it in negotiations, even saying at one point in October it would never be included. The nation now seems to have a change of heart announcing a plan to increase penalties on violations of intellectual property rights and is supposedly considering making it easier to hand down criminal punishments. This is a major step forward in trade talks and equity markets are responding, however, it hasn’t moved the needle on commodities such as crude oil and copper.
Today, the People’s Bank of China warned of financial risks and mounting economic headwinds due to trade in an annual report. Furthermore, the self-imposed deadline is nearing for Washington to implement a fresh round of tariffs on Dec. 15. Considering the smoke and mirrors jawboning we’ve become accustom to over these last two years of negotiations, although for face value China’s announcement is a considerable positive, we must still take it with a grain of salt until there is further proof.
The economic calendar for this holiday week is off to a slow start. Chicago Fed National Activity worsened in October to the lowest in more than three years. Tonight, Fed Chair Powell is expected to speak at the Greater Providence Chamber of Commerce annual dinner at 6:00 pm CT and traders should look for comments on monetary policy. Tomorrow brings housing data and Consumer Confidence. The odds of a hike at the Fed’s Dec.11 policy meeting are holding steady at 6%.
Technicals: After a healthy consolidation to finish last week, price action is firmly higher ahead of the opening bell. For the S&P 500, Friday’s settlement aligns with our momentum indicator to bring support at 3111.50-3114.25 and the tape is overall bullish in the near-term as long as it can hold out above here. Furthermore, the bulls have a clear advantage in setting fresh records into the close while holding our 3118.50 pivot. Similarly, we have support in the Nasdaq 100 at 8280.50-8295.75 and the bulls are in the driver’s seat holding above here. Still, there are overhead resistance levels and for the S&P it aligns the rising trendline from April that the market has yet to close out above with the record high brining major three-star resistance at 3126-3132.50.
Bias: Neutral
Resistance: 3126-3132.50***, 3165-3180***
Pivot: 3118.50
Support: 3111.50-3114.25**, 3095.50-3099***, 3086*, 3075.50-3077**, 3063.25-3069.25***
NQ (December)
Resistance: 8330-8341.50**, 8375.50-8384.25***
Support: 8280.50-8295.75**, 8233-8250***, 8207.25-8213**, 8150-8179.25***, 8090.25-8100**
Crude Oil (CLF)
Last week’s close: Settled at $57.71, down 81¢ on Friday and down 0.06 on the week
Fundamentals: Crude oil slipped from two-month highs on Friday and is edging ever so slightly lower this morning despite a more upbeat U.S.-China trade narrative that now supposedly includes intellectual property rights. There are hopes that the OPEC + 1 meeting next week will extend production cuts and raise compliance. As the committee fights dissipating demand growth and global economic headwinds, this has been a bullish factor ahead of the Saudi Aramco IPO.
Technicals: Price action stalled against our next wave of resistance at $58.64 to $58.93 and Friday’s retreat was met by the 200-day moving averages as support. This level comes in at $57.31 today and we must see a close below here in order to begin neutralizing the recent strength.
Bias: Neutral
Resistance: 57.71-57.94**, 58.64-58.93**, 60.45***
Support: 57.31-57.46***, 56.90-57.05**, 56.01-56.20***
Gold (GCZ)
Last week’s close: Settled at $1,463.6, unchanged
Fundamentals: With an upbeat U.S-China trade narrative that now includes some substance coupled with rising odds of a Fed hike next month, Gold continues to trickle lower. Do we think intellectual property is now fully included in trade negotiations? No. Do we think the Fed has any chance of hiking next month? No. This leads into our narrative of patience for buying Gold during this seasonally weaker time of year and as we prepare for a seasonally bullish time of year.
Technicals: Despite early gyrations higher on Friday off first key support, price action was lackluster at best through the second half of the day as equity markets finished on a strong note. Gold is testing major three-star support today at $1,450 to $1,454, as we remain longer-term bullish and near-term cautious, we want to see how the metal responds on this most recent dip. Our momentum indicator aligns with settlement to create first key resistance.
Bias: Neutral
Resistance: 1461.7-1463.6**, 1471.9-1474**, 1482.6-1484.5***, 1491**
Support: 1450-1454***, 1446.2*, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.
